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Job growth in June…

United States

June payrolls grew by 222k, 44k more than expected and the two prior months were revised up by 47k. The private sector added 187k, 17k above the forecast as government workers added 35k to the headline number. Private sector job creation in May was revised up by 12k to 159k and by 21k to 194k for April. The household survey added 245k (185k of which came from the key 25-54 yr cohort but those aged 20-24 lost 185k jobs while those over age 55 added 178k jobs) and because the labor force grew by 361k, the unemployment rate rose one tenth to 4.4% so we can say that is a good reason for a rise. The U6 figure was up by two tenths to 8.6% as there was a pickup in discouraged workers. The participation rate rose one tenth to 62.8% after falling by two tenths in May. The employment ratio was up by one tenth to 60.1%. The pool of available labor continues to shrink to the lowest level since April 2008 but the pace slowed in June. This shrinking supply was still only good for a .2% m/o/m rise in earnings and 2.5% y/o/y. The same trends as has been seen but hours worked did tick up by one tenth which meant that average weekly earnings did accelerate to 2.8% y/o/y growth. Aggregate hours worked did rise to the highest level in this recovery which means that productivity is still punk because it’s not generating a faster pace of economic growth.

After shedding 70k jobs over the prior 4 months, retail added back 8k. Manufacturing contributed 1k while construction added 16k. Education/health and leisure/hospitality continued to be a key contributor.

We did see a rise to a 3 month high in those working part time for economic reasons but that was because of Slack Work, not because they can’t find full time jobs.

Bottom line, smoothing out the numbers is always the best way of providing perspective and the 6 month year to date average is 180k vs 187k last year, 226k in 2015 and vs 250k in 2014 so the pace of slowing is clear. The average for the private sector year to date is 171k, the same trend as 2016 but down from 213k in 2015 and 239k in 2014. Treasury yields are slightly lower in response to the data as the private sector number was only slightly above expectations and wage growth was still only modest. The 2 yr yield was 1.40-41% just prior vs the 1.39-1.40% right now and the 10 yr yield came in 1 bp. The US dollar is also a hair weaker than where it stood just prior.

As for the Fed, today’s data is not moving the needle. They are tightening in September whether via another rate hike or by initiating QT. They see the shrinking pool of available labor and the low unemployment rate and their models thus tell them that faster wage growth is still around that corner.